Estate agents hit back at IMF

PREDICTIONS of a housing market crash have been slammed as 'scaremongering' by the National Association of Estate Agents.

Their comments follow a warning from the International Monetary Foundation (IMF) that the UK property market is fragile in comparison to other leading economies, and in danger of crashing if interest rates continue to rise.

But the NAEA does not believe that the sharp increase in UK house prices can be solely attributed to lower interest rates and higher economic growth. It also highlights the problems faced by many getting onto the property ladder.

Although predicting a continuing cooling of in the market over the next few months, it has reacted angrily to the IMF and says they are 'badly wrong' about a sharp drop in the housing market.

Peter Bolton King, chief executive of the NAEA, said: 'We believe the IMF is needlessly flying a kite and scaring homeowners. They cite increasing interest rates as a reason for precipitating a crash, but opinion is that if rates go up at all it will be by just 0.25% in November and that will be the peak.

'If the Bank of England puts up rates to 5% it will not cause the roof to fall in on the housing market, it will merely continue the slowdown,' he added.

Yet Countrywide, the largest chain of estate agents in the UK, issued a profits warning today, after seeing sales fall by a fifth in August, with clear signs of a similar drop this month.

Earlier this week, figures published by the British Bankers' Association (BBA) revealed the value of mortgages lent by British banks last month had fallen to its lowest level for more than two years, while the Council of Mortgage Lenders (CML), said gross mortgage lending dropped 13% between July to August.

Also this week, Cheltenham & Gloucester's latest Housing Affordability Index revealed homeowners had seen the cost of mortgages soar by around 12% in the last year alone.

Despite the growing evidence of a sustained cooldown in the market, Bolton King is adamant homeowners need not fear a crash in the near future.

'All year we have been predicting a slowdown and this is what we are seeing now - part of this is a natural summer slowdown, and part is the delayed reaction to a series of interest rate rises earlier this year.

'The factors that would precipitate a crash are just not there. We don't have raging inflation or high unemployment and rates seem unlikely to rise much further. As an island, there is always a shortage of property and that will continue to fuel demand, albeit at a more realistic level,' he added.

The NAEA also has support from the Royal Institute of Chartered Surveyors (RICS), who this week ruled out a crash in the property market, despite noting that house prices had fallen for the first time in a year.

Ian Perry, national housing spokesman for RICS, said: 'Some speculation in the housing market is quite gloomy at the moment. However, we are confident that a prolonged slide in prices will be avoided, underpinned by the strength of the economy and good employment prospects.'